We turned on the heat today. This was a particularly unusual move because it breaks with our “its got to be really cold outside or at least November 1st” tradition. It may seem a bit early in the season, but we really couldn’t help ourselves. We needed to turn on that new shiny silver $5,000 box in the basement to make sure it actually worked. Like many homeowners this summer, we decided to take the leap and finally change out our ancient furnace. The new energy efficiency incentives, from Xcel Energy and from the federal government, tipped the balance for us. We convinced ourselves that the $1500 tax credit alone made good financial and environmental sense. We moved into our current home four years ago. We inherited one of those ninety year-old oil boilers that grumbled all winter long reminding us just how cold it was outside and how much oil we were burning to stay warm.
We are stalwart environmentalists. We bicycle to work, recycle like mad, and buy organic food. We also usually understand the basics of energy economics. Yet, the furnace purchase truly challenged our sensibilities. We puzzled over how efficient was good enough? In the end, our furnace decision was a drawn out compromise that won’t earn us the highest “green” accolades but will hopefully save us money in the long run and put less particulate matter into the air above us.
We really did begin with the highest efficiency resolve. The incentive plan required that we purchase a new furnace with a 95% or higher AFUE rating (Annual Fuel Utilization Efficiency). We invited the various salesmen over for bids. They left their brochures. My husband scoured the Internet for information about the sleek models, mostly German, which would actually meet the required efficiency rating we needed to get the tax credit. We looked at the price tags and did the math, again and again. Our old furnace was likely running at 50% efficiency. New furnaces ranged from 80-94% AFUE. Was an extra $3000 worth a 10% gain in efficiency? How long was the payback after all? Was there anyone in the Twin Cities who actually had the knowledge, experience, and spare parts, to service these new high efficiency models?
A month later we came to a decision. We went with a Canadian model that was assembled at our local shop. It isn’t a German boiler, it isn’t 95% efficient, and it didn’t get us the tax credit. We choose a model that was rated at 85% AFUE at a cost of about $5000. We selected a heating company with decades of experience with these models. We didn’t want to run the risk of a winter furnace failure and no local service people to come to our rescue. I was probably over-reacting on this point, but with two little kids in the house I didn’t want to take any chances.
When we added up all the known and unforeseen costs, including removing the rusted oil tank, paying for asbestos abatement on our furnace and installing higher capacity gas lines, the new furnace was a huge investment. We still have no idea how much natural gas we’ll actually use this winter and how much savings we will earn over past years. On the plus side, our new furnace is a quarter the size of the old beast and is so amazingly quiet. The local businesses that we hired for the project were first-rate and made sure we knew how the new system works.
The one lesson we took away from this experience is that some routine household energy efficiency decisions are far more challenging than others. Changing a light bulb is easy after all. Bringing cloth bags to the grocery store just requires a change in habit. Financing a new energy system is mind bending. Clearly, its good for the economy and the environment for more people to make smart energy efficiency investments. Yet, how can state and national incentives help homeowners reasonably understand the costs and benefits without needing a PhD in energy economics?
Our conclusion is that the new energy incentives have left most people scratching their heads about where these efficiency numbers and targets come from. For example, the “cash for clunkers” car program required that the new vehicle you purchased was just 10 mpg better than the one you traded. If you achieved this minimal standard, you were eligible for the full $4,500 rebate. Economists and environmentalists responded that the 10 mpg increase was simply got good enough to address the greenhouse gas problem. It was good enough, however, to sell a lot of cars.
The furnace efficiency ratings seem to have gone too far in the opposite direction. Why does a new furnace need to be 95% efficient or higher to qualify for a tax credit? Our old furnace was probably 50% efficient. Our new furnace is rated at 85% AFUE. While this is still a huge gain, we weren’t eligible for any federal tax credits or rebates. American homeowners are clearly ready to make changes in their use of energy. Unfortunately, the new incentive systems are so complicated to navigate that we can end up losing focus on why we are making these changes in the first place.
I know that our family will be toasty warm this winter. I also know that we’ll be keeping a close eye on the numbers to see if this investment pays off in the near future.